Accession Number : AD0634199

Title :   PRODUCTION FUNCTIONS AND CAPITAL DEPRECIATION,

Corporate Author : RAND CORP SANTA MONICA CALIF

Personal Author(s) : Enke, Stephen

Report Date : 16 FEB 1961

Pagination or Media Count : 23

Abstract : Production functions that determine the shares in output and income 'going' to labor, capital, or land, are basically output functions. Output is the dependent variable and stocks of 'capital,' and of certain other inputs, are the independent variables. This basic relationship--but not net income shares--is independent of the subsequent longevity of the factor inputs. Output isoquants can readily be reinterpreted as constant gross value added curves if the value of the 'throughput' is constant. Accountants and economists can subsequently distinguish net and gross value added isoquants. But output is output and physical. Determination of the most economical capital-to-labor combination requires that the gross cost of these factors, including the cost of capital stock depreciation, be considered. If only net interest and wages are taken to be the cost of capital and labor respectively, these costs must be related to a net value added function, otherwise the supposed 'optimum' will involve too much capital relative to labor. (Author)

Descriptors :   (*INDUSTRIAL PRODUCTION, *ECONOMICS), (*DISTRIBUTION FUNCTIONS, INDUSTRIAL PRODUCTION), DISTRIBUTION(ECONOMICS), LABOR, SALARIES, MONEY, INDUSTRIES, OPTIMIZATION

Subject Categories : Economics and Cost Analysis
      Statistics and Probability

Distribution Statement : APPROVED FOR PUBLIC RELEASE